Reform in the London Insurance Market - The Past, Present and Future. June 2007

Transcription

1 Reform in the London Insurance Market - The Past, Present and Future June 2007

2 Agenda Some facts about London The Players The Past Previous initiatives Current Developments Where we are today The Future Known future plans

3 London - some key facts Is not the UK insurance industry it is a distinct, separate part of it Consists mainly of general (non Life) insurance and reinsurance predominantly high exposure risks Gross premium is conservatively estimated to be GBP 21.7bn World s 2 nd largest commercial insurer and 6 th largest reinsurer Main business types: Non-Marine treaty reinsurance Non-Marine direct and facultative and home- foreign Marine, aviation and transport 50,000 people work in the London Insurance Market (40,000 based in or local to the square mile) Location is probably the most competitive advantage of London close ties between the market participants

4 London - some key facts Main types of business (for Lloyd s) Reinsurance 30% Casualty 26% Property 22% Motor 7% Marine 7% Energy 5% Aviation 3%

5 London - some key facts Business by Region (for Lloyd s) US 34% UK 24% Europe 18% Other Americas 11% Asia/Africa 7% Rest of the World 6%

6 London - some key facts London share of world insurance: Marine business (Market leader) 15% Aviation business (Market leader) 39% Reinsurance business 5-10% but 25% of international available business

7 Lloyd s Lloyd s is the best known but least understood insurance brand Is not an Insurance Company it is a market supervised by the Corporation of Lloyd s Is a Brokers market Underwriters do not generally deal with clients Has no shareholders and no liability individual members and Corporate Capital Is 319 years old Lloyd s has a franchise model, does not regulate, but monitors performance 44 Managing Agents that run 62 Syndicates 94% of FTSE companies hold policies with Lloyd s 93% of Dow Jones companies hold policies with Lloyd s GBP 14.7 billion gross premium (2004)

8 The London Insurance Market The Real People

9 CLIENTS London BROKER Company U/W Lloyd s syndicate Internat nl BROKER Internat nl U/W

10 CLIENTS Producing / London BROKER INSURER CEDANT London BROKER REINSURER RETRO- CEDANT London BROKER RETRO- CESSIONAI RE

11 The London Insurance Market The Key Processes

12 PLACING Client advises firm order Broker prepares MR slip Market Lead(s) review and write line Other underwriters review and write line CLOSING Broker completes risk placement (Broker Closes delinked) Client pays Broker Closes to Bureau (OR triggers delinked payment) DOCUMENTATION Contract produced U/W / XIS agree Contract issued to client Debit Note sent to Client

13 CLAIM ADVICE Broker prepares documentation Market Lead(s) review and agree Other insurers review and agree Broker advises Client CLAIM SETT. Broker prepares documentation Market Lead(s) review and agree Other insurers review and agree Claim paid to client

14 The Role of the Bureau Technical checking Policy checking Premium checking Policy production Central accounting Daily settlement All Lloyd s and many IUA transactions with Brokers Claims Bureau Claims service for Lloyd s and Claims Minimum standards Second pair of eyes

15 Past Reform in the London Insurance Market (1987 onwards) June 2007

16 Some History setting the scene Number of Players Brokers Underwriters The LIBC The Bureaux LPSO (Lloyd s) ILU (Marine Company) PSAC (Non Marine Company)

17 Some History setting the scene LIMNET in London The Community The IBM Network Central resource team RINET in Europe The Joint Venture a little later Wise later still

18 Key Areas developed Signings Claims ELASS CLAMS Lloyd s claims agreement/lloyd s claims office Placing EPS and EPSS Closing and Settlement LORS RI client settlement ECA

19 Reform today in the London Insurance Market (From 2000) June 2007

20 The Players - today Lloyd s Underwriters Members (capital providers) 89% corporate 11% individual members Syndicates Managing Agents Company Underwriters Brokers 3 Market Associations LMA IUA LMBC Lloyd s Xchanging Insure Services (XIS) Xchanging Claims Services (XCS)

21 The London Insurance Market Electronic Messaging

22 Electronic Messaging Bureau processing Signing messages for all bureau business: All daily policy, premium and claim transactions Non ACORD (EDIFACT) All Lloyd s Underwriters All Company Underwriters Nearly all Brokers 95% business Claims (CLASS System) for 95% transactions for Company bureau business Non ACORD (EDIFACT) All Company Underwriters All Brokers Lloyd s now implementing as part of ECF

23 Electronic Messaging - Bureau processing Lloyd s Outward R/I for 100% business: Non ACORD (EDIFACT) All Lloyd s Client Underwriters All Brokers

24 Electronic Messaging other Non bureau accounting and settlement Non bureau claims

25 The London Insurance Market The Market Reform Programme

26 Why Reform? Improve service to clients Maintain existing business Attract new business Achieve contract certainty Earlier documentation to clients Speed up down stream processing Premiums payment Endorsement processing Claims agreement Claims settlement Greater transparency Competition

27 Strength of driver Survey shows lowest satisfaction for most important aspects of business processing 2 Areas of concern Areas to promote Satisfaction score Speed of policy Info through claims process Speed of settlement Processes to notify of claim Accuracy of policy Agree endorsements in time Info confirming coverage Speed of confirmation Quote turnaround Accuracy of quote Source: Lloyd s, January 2006

28 Given the scope of the Market Reform challenge, it is not realistic to expect to move to the aim in one step Initiatives Early focus on standards, measurement, eg, Contract Certainty Improves efficiency, but still largely paper based At same time develop system solutions Then transfer improved processes to new systems Electronic Efficiency Paper Inefficiency Paper Efficiency Impact Early focus on paper based efficiency meets regulatory imperative Customer service also improves Cost of change likely to drive costs up before long-term savings emerge Time

29 ACORD Roadmap for London Projects and Phases Phase 1 Phase 2 Phase 3 Phase 4 Common End Vision Placing Simple ACORD Placing message 1-way messaging More detailed ACORD Placing message 2-way messaging Endorsements, renewals, and cancellations. Comprehensive ACORD Placing message and all related business flows (endorsements) - All parties involved - All processes fully automated Accounting & Settlement Claims Repository functionality London EDI CLASS in Companies Market Lloyd s Claims Agreement London EDI ELPAN 2 ECF Repository CLASS in Lloyd s and Companies Market London EDI 2-way messaging, ACORD Technical Acct ACORD Financial Acct Repository + ACORD Claims Movement message ACORD Technical Acct Strategic A&S - ACORD RLC messages - Enables remote working but does not impose it Nb. Project phases are not linked

30 The London Insurance Market The Market Reform Programme

31 Future Reform in the London Insurance Market June 2007

32 Bermuda - Key Points Within months of Katrina USD 18.4bn capital was raised - 7.5bn flowing into Bermuda. Same four years previous. However, some concerns by rating agencies too narrow focused. Bermuda offers a market (40+ people to see), but will it ever be a market for the small business Is it just a market for big ticket business, catastrophe excess and property business?

33 Why Bermuda Obviously enjoys cost advantage over rival reinsurance centres, particularly London. Tax differential of 30% cannot be ignored. Some say underwriters pay 10% more for their business in London (Hamilton). Business acquisitions cost; Lloyd s 26% London 19% Bermuda 17% Combined Expenses; Lloyd s 38% London 30% Bermuda 26%

34 However, London Has Much To Offer 1. Market Infrastructure Level of expertise and critical mass, of course there are inefficiencies. 2. Lloyd s Worldwide Licence Being able to expand overseas; Lloyd s licence in China. India? 3. Security Marketing in emerging markets. Central Fund at Lloyd s; Ensuring a strong rating. 4. Distribution Complex relationships today but being resolved. Brokers bring in business from all over the world into London. 5. Regulation Knowing this is light in Bermuda will it ever become stronger?

35 Summary Capital flows to those with best returns. Bermuda Excellent two decades. Some say however that Bermuda has to diversify. Will regulators have a big say?

36 ACORD Roadmap for London Projects and Phases Phase 1 Phase 2 Phase 3 Phase 4 Common End Vision Placing Simple ACORD Placing message 1-way messaging More detailed ACORD Placing message 2-way messaging Endorsements, renewals, and cancellations. Comprehensive ACORD Placing message and all related business flows (endorsements) - All parties involved - All processes fully automated Accounting & Settlement Claims Repository functionality London EDI CLASS in Companies Market Lloyd s Claims Agreement London EDI ELPAN 2 ECF Repository CLASS in Lloyd s and Companies Market London EDI 2-way messaging, ACORD Technical Acct ACORD Financial Acct Repository + ACORD Claims Movement message ACORD Technical Acct Strategic A&S - ACORD RLC messages - Enables remote working but does not impose it Nb. Project phases are not linked

37 Placing Quote Place Endors e

38 Placing Quote Place Endors e MR slip Implemented G6 Implemented G6 phase 1 G6 phase 2 (Two-way messaging) Implemented Implementation from June 2007 MRSIG Complete pilot end Q2 2007

39 Placing Quote Place Endors e MR slip Implemented G6 Implemented G6 phase 1 G6 phase 2 (Two-way messaging) Implemented Implementation from June 2007 MRSIG Complete pilot end Q GPD PLACING IMPLEMENTATION GUIDE Completed - awaits MRG decision on rollout Publish June 2007 (G6 incorporated) PLACING IMPLEMENTATION GUIDE Update to include MRSIG Q DOCUMENT REPOSITORY INTERFACE IMPLEMENTATION GUIDE Re-publish June 2007 with London rules incorporated TESTING AND CERTIFICATION FACILITY Already implemented with London DRI rules included Support for placing targeted for June 2007

40 Accounting and settlement Close Accoun t Settle

41 Accounting and settlement Close Accoun t A&S Strategic Settle Guide for ongoing reference A&S phase 1 ELPAN2 Implemented Peer to Peer accounting Generally available from October 2007 Signing messages; BSM, CSM, USM Implemented Implemented internationally, not yet in London

42 Accounting and settlement Close Accoun t A&S Strategic Settle Guide for ongoing reference A&S phase 1 ELPAN2 Implemented Peer to Peer accounting Generally available from October 2007 Signing messages; BSM, CSM, USM Implemented Implemented internationally, not yet in London ACCOUNTING & CLAIMS IMPLEMENTATION GUIDE ELPAN2: Bureau EBOT: Non Bureau Publish June 2007 with ELPAN2 and EBOT requirements incorporated DOCUMENT REPOSITORY INTERFACE IMPLEMENTATION GUIDE Re-publish June 2007 with London rules incorporated TESTING AND CERTIFICATION FACILITY Already implemented with London DRI rules included Support for Accounting targeted for August 2007

43 Claims Advice Paymen t Settle

44 Claims Advice Paymen t Settle CLASS (Company market) CLASS (Lloyd s) Implemented Rolling out Signing messages; BSM, CSM, USM Implemented ECF Rolling out Peer to Peer claims Implemented internationally

45 Claims Advice Paymen t Settle CLASS (Company market) CLASS (Lloyd s) Implemented Rolling out Signing messages; BSM, CSM, USM Implemented ECF Rolling out Peer to Peer claims ACCOUNTING & CLAIMS IMPLEMENTATION GUIDE EBOT: Non Bureau Implemented internationally Publication with EBOT requirements targeted June 2007 DOCUMENT REPOSITORY INTERFACE IMPLEMENTATION GUIDE Re-publish June 2007 with London rules incorporated TESTING AND CERTIFICATION FACILITY Already implemented with London DRI rules included

46 Other issues The role of the Bureau, hubs and central systems Implementation dates, but what about take up and rollout

47 ACORD London Agenda Standards Strategy Business Process and Process Services Single Business Dictionary Single Data Model UN CEFACT and eeg7 Standards Development Placing Implementation Guide Electronic Facultative Claims Submission (ECOT) Maintenance Requests Potential Ocean Marine/Cargo Joint work with PCS Domain Web Services Profile Standards Implementation Enhanced Certification Enhance Implementation Reporting OARS ROI Model DRI for claims, A&S, placing, and wordings A&S Placement Claims Global Placing Document ELPAN2 On-going ACORD support for: Market Reform Other London Market - Non Reform initiatives (local and international) Membership Growth Retention Participation London Market International Market Industry and Government Affairs UK/Europe Whitepaper IAIS XBRL Advocacy London Forum ACORD LOMA Forum ACORD TV Other Industry meetings Year in Review

48 World Headquarters: Two Blue Hill Plaza 3rd Floor Pearl River, NY USA London office: LUC - Suite 1/3 3 Minster Court Mincing Lane London EC3R 7DD UK